Tag: whatsapp

Complementary Goods Explained

Ashish4 Comments

Workers returning to the office and socialising after pandemic lockdowns helped lead to a 15% surge in sales of deodorants, according to the maker of Dove, Rexona and Impulse.

https://www.theguardian.com/business/2023/oct/26/surge-in-deodorant-sales-at-unilever-after-workers-return-to-office

A friend is fond of pointing out and celebrating teachable moments, and I’m going to struggle to find better examples of complementary goods!

By the way, I’ll be in Vietnam this entire week, first in Hanoi and then in Hoi An, so food recommendations, and other tips – very much in that order – are very welcome.

This link was shared with me via a WhatsApp group which shares one interesting link a day, and the group is set up in such a way that only the admins can send messages. Social media done right, if you ask me.

The Economics of ReCAPTCHA

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This has been doing the rounds on my Whatsapp groups recently, and maybe you’ve seen it too:

Mildly funny, but the story behind it is quite something.

Bots have been a problem for many many years – much before Elon Musk thought of buying Twitter. And as long as sixteen years ago, folks were trying to solve the problem of stopping bots from signing up for services. So how does a computer make sure that the entity trying to sign up for a service actually is a human?

Well, by showing images such as these, and asking the entity on the other side to make out what the word is:

We’ve all been subjected to a variant of this, haven’t we.

Now, one of the folks who came up with this system – it’s called Captcha (say it out aloud and you can figure out the reason behind the name) ran the numbers:

And at some point I did a little back of the envelope calculation about how many of these were typed by people around the world, and it turns out the number I came up with was about 200 million.
So about 200 million times a day somebody would type one of these CAPTCHAs, and that’s when I started thinking, “I wonder if we can do something with this time.” Because the thing is each time you type one of these, not only are they annoying but also they waste about ten seconds of your time, and if you multiply ten seconds by 200 million, you get that humanity as a whole is wasting like 500,000 hours every day typing these annoying CAPTCHAs.

https://tim.blog/wp-content/uploads/2018/08/135-luis-von-ahn.pdf

Work that will gladden the heart of any economist. And so the guy who did these back of the envelope calculations tried to figure out how these 500,000 hours might be put to better use. Thus was born reCAPTCHA. And the idea was a very, very good one.

When you digitize, or scan books for the first time, there will be books with old fonts, outdated fonts. And therefore there will be a fair few words that computers will not be able to decipher. And not just books, this is also true of newspaper archives.

So if we have scanned books and newspaper archives that are non-machine-readable, and we have humans spending 500,000 hours every day… what about connecting the two, and having humans read these words, one at a time?

Scanned text is subjected to analysis by two different OCRs. Any word that is deciphered differently by the two OCR programs or that is not in an English dictionary is marked as “suspicious” and converted into a CAPTCHA. The suspicious word is displayed, out of context, sometimes along with a control word already known. If the human types the control word correctly, then the response to the questionable word is accepted as probably valid. If enough users were to correctly type the control word, but incorrectly type the second word which OCR had failed to recognize, then the digital version of documents could end up containing the incorrect word. The identification performed by each OCR program is given a value of 0.5 points, and each interpretation by a human is given a full point. Once a given identification hits 2.5 points, the word is considered valid. Those words that are consistently given a single identity by human judges are later recycled as control words. If the first three guesses match each other but do not match either of the OCRs, they are considered a correct answer, and the word becomes a control word. When six users reject a word before any correct spelling is chosen, the word is discarded as unreadable.

https://en.wikipedia.org/wiki/ReCAPTCHA

The system has evolved since then, and this version of reCAPTCHA (known as reCAPTCHA v1) is no longer around. We now have reCAPTCHA v2 and reCAPTCHA v3, and if you’re curious, you can learn more about it here.

But I really like the idea behind reCAPTCHA v1, even though it is no longer in use. It used the opportunity presented by a necessary but time-consuming activity by matching it with a necessary but money-and-effort-consuming activity, to the benefit of all concerned.

Turns out the person who came up with the idea has been thinking about computers and human brains as being complementary to each other for a fairly long time, even writing a PhD thesis about it:

Von Ahn’s Ph.D. thesis, completed in 2005, was the first publication to use the term “human computation” that he had coined, referring to methods that combine human brainpower with computers to solve problems that neither could solve alone. Von Ahn’s Ph.D. thesis is also the first work on Games With A Purpose, or GWAPs, which are games played by humans that produce useful computation as a side effect. The most famous example is the ESP Game, an online game in which two randomly paired people are simultaneously shown the same picture, with no way to communicate. Each then lists a number of words or phrases that describe the picture within a time limit, and are rewarded with points for a match. This match turns out to be an accurate description of the picture, and can be successfully used in a database for more accurate image search technology. The ESP Game was licensed by Google in the form of the Google Image Labeler, and is used to improve the accuracy of the Google Image Search. Von Ahn’s games brought him further coverage in the mainstream media. His thesis won the Best Doctoral Dissertation Award from Carnegie Mellon University’s School of Computer Science.

https://en.wikipedia.org/wiki/Luis_von_Ahn

There’s an old talk by Louis von Ahn on the topic as well, if you’re interested.

And here’s the kicker: the same idea, human computation, is at work another venture that Louis von Ahn has started. You may have heard of it, it has got this cute little green owl as its mascot:

So the way this works is whenever you’re a just a beginner, we give you very simple sentences. There’s a lot of very simple sentences on the web. We give you very simple sentences along with what each word means. And as you translate them and as you see how other people translate them, you start learning the language. And as you get more advanced, we give you more complex sentences to translate. But at all times, you’re learning by doing.

https://www.ted.com/talks/luis_von_ahn_massive_scale_online_collaboration/transcript?language=en

Both reCAPTCHA v1 and Duolingo have different business models now, of course. But as students of economics, its’s worth appreciating the idea of complementarity between humans and computers, and the idea of turning a necessary but time intensive activity into a socially useful one.

It may be a funny Whatsapp forward, sure, but as it turns out, there’s quite a story behind it. No?

Signal: Pricing and Privacy

AshishLeave a comment

This will not inspire confidence, but still: I am one of those idiots who actually paid Whatsapp money before it got taken over by Facebook.

Back in the day, before Facebook had completed its takeover of Whatsapp, the service used to charge a nominal fee for its users. Actually, even that fee was a farce, because after the first year (which was always free), you could in effect simply continue to use Whatsapp without paying a dime.

But so impressed was I with the app, and so much of a believer in paying for what I really liked, that I went ahead and actually paid up.

Doesn’t much inspire confidence in my ability to understand economics, let alone teach it, but there you go.

We all know what happened next of course, including Facebook swallowing up Whatsapp, and then the change in the terms and conditions of 2016 – and now of course, the latest proposed change. Which, if you’ve been keeping track, has itself been pushed out to a later date.

Never a dull moment, as they say.

And the whole brouhaha has resulted in Signal and Telegram seeing record sign-ups. A couple of Whatsapp groups that I am a part of have also migrated over to Signal, because of Whatsapp’s (Facebook’s, really) privacy issues, and because I am a sucker for trying new things, I have installed the app and the desptop version.

Which so far isn’t actually going all that well, because all that has happened is I now have two messaging apps and two desktop apps, but let’s see how it goes. Signal, of course, is much more about privacy than Whatsapp:

…our engineers spend all their time fixing bugs, adding new features and ironing out all the little intricacies in our task of bringing rich, affordable, reliable messaging to every phone in the world. That’s our product and that’s our passion. Your data isn’t even in the picture. We are simply not interested in any of it.

Now, I usually provide a link to the place I take the excerpt from, as indeed I should. In this case, I didn’t because I wanted to spend some time speaking about where I was a little sneakt. I took it from not the Signal website, but the Whatsapp blog. This particular post was from 2012, and it actually begins with a quote from Fight Club. Yes, seriously.

So, as I was saying, I’ll give Signal a shot, but I’m not holding my breath this time around. Without some way to get people to pay for what they use, things are not likely to work out, and that’s just the way it is. You pay with your money, or you pay with your information – unless you’re Wikipedia, and even they need the occasional helping hand.

That Whatsapp blogpost ends with this line:

When people ask us why we charge for WhatsApp, we say “Have you considered the alternative?”

https://blog.whatsapp.com/why-we-don-t-sell-ads

… and my current view is, there isn’t one. You can pay with your information, or you can pay with your money, but as I said in a Principles of Econ course I taught last semester, you gotta pay one way or the other.

But it’s the other way that I wanted to speak about today, by citing an idea that more people should be thinking about: dominant assurance contracts. Lengthy excerpt follows:

The dominant assurance contract adds a simple twist to the crowdfunding contract. An entrepreneur commits to produce a valuable public good if and only if enough people donate, but if not enough donate, the entrepreneur commits not just to return the donor’s funds but to give each donor a refund bonus. To see how this solves the public good problem consider the simplest case. Suppose that there is a public good worth $100 to each of 10 people. The cost of the public good is $800. If each person paid $80, they all would be better off. Each person, however, may choose not to donate, perhaps because they think others will not donate, or perhaps because they think that they can free ride.

Now consider a dominant assurance contract. An entrepreneur agrees to produce the public good if and only if each of 10 people pay $80. If fewer than 10 people donate, the contract is said to fail and the entrepreneur agrees to give a refund bonus of $5 to each of the donors. Now imagine that potential donor A thinks that potential donor B will not donate. In that case, it makes sense for A to donate, because by doing so he will earn $5 at no cost. Thus any donor who thinks that the contract will fail has an incentive to donate. Doing so earns free money. As a result, it cannot be an equilibrium for more than one person to fail to donate. We have only one more point to consider. What if donor A thinks that every other donor will donate? In this case, A knows that if he donates he won’t get the refund bonus, since the contract will succeed. But he also knows that if he doesn’t donate he won’t get anything, but if does donate he will pay $80 and get a public good which is worth $100 to him, for a net gain of $20. Thus, A always has an incentive to donate. If others do not donate, he earns free money. If others do donate, he gets the value of the public good. Thus donating is a win-win, and the public good problem is solved.

https://www.cato-unbound.org/2017/06/07/alex-tabarrok/making-markets-work-better-dominant-assurance-contracts-some-other-helpful

Will this work for Signal? Can those of us who believe in paying an amount (how much is a function of which country, how generous you are feeling, how much you use the app, how much revenue you stand to earn by using the app etc, etc) be coordinated by a rather visible hand?

I don’t know the answer, but if any budding microeconomist out there is looking for a cool problem to play around with, I have a free blogpost to sell to you.

(For the budding microeconomist, further reading: Vitalik Buterin not getting what’s so cool about dominant assurance contracts, and an MR post about the issue. Further further reading: be sure to take a look at Rahul’s comment in the MR post.)